The new Financial Adviser Standards and Ethics Authority looks likely to miss deadlines for approving standards for financial advisers despite the Hayne royal commission reserving some of its worst criticism for the industry's practice of providing fees for no service, inappropriate advice and improper advice by advisers.

The Financial Planning Association (FPA) said it is "frustrated and in a cloud of uncertainty" and predicts there are unlikely to be any new financial planners entering the industry for at least 18 months.

CPA Australia, representing accountants, predicted an exodus of advisers who will decide not to retrain from January 2024, which is the deadline for them to get new qualifications.

FASEA was established in January 2017 although its new chief executive, Stephen Glenfield, was not appointed until a month ago.

The authority has set a deadline of January 1, 2019 for new financial advisers to get higher-education qualifications before they can be licensed.

Requirements include 24 bachelor-degree subjects that have been approved by FASEA. But as recently as August 23 the then-acting managing director, Dr Mark Brimble, said in written correspondence that FASEA's standards were yet to be finalised and the organisation had "not yet started accrediting programs and courses".

A full-time student would need 36 months to complete 24 units at bachelor level, meaning it would be three years before any would-be financial adviser could start work. This assumes a higher education provider had submitted a course for FASEA approval before the end of this year.

Chief executive at FPA Dante De Gori said "what the royal commission means is it's more important than ever for these standards to be implemented as soon as possible. These are needed now more than ever."

He said as far as new entrants were concerned "you not only have to have an approved degree but you also need to do a minimum 12 months' traineeship and pass an entrance exam and sign up to a new code of ethics".

Slow' providers

On September 21, in response to a written question from The Australian Financial Review, FASEA said the code of ethics was still in draft form and it was considering industry and consumer feedback "prior to finalising the code in coming months".

The code of ethics looks likely to be a major stumbling block for existing entrants. Studying an approved course on the code is mandatory for all existing advisers, including advisers who already have a higher education qualification in a related course.

But higher education providers are notoriously slow in approving new courses, which have to be submitted to academic councils and, as FASEA admitted, the code itself is not finalised.

Advisers with no formal qualifications will have to do eight approved subjects by 2024.

And advisers who have qualifications related to the industry will have to do a minimum of three courses at bachelor-honours level before 2024.

"The timelines are set in legislation and they are tight and getting tighter the longer it goes without being finalised," said Mr De Gori.

"We want FASEA to come out sooner rather than later for our members and for the education sector so would-be advisers can enrol."

CPA Australia said research has revealed more than 50 per cent of 25,000 existing financial advisers may exit the sector over the next five years, in part owing to the FASEA requirements.

The head of external affairs at CPA, Paul Drum, said the consequences would be far reaching, from affecting accessibility of advice for the broader community to a loss of mentors for younger advisers

"With less than three months to go, limited consultations and with no published education standards or a finalised Code of Ethics we are now deeply concerned how education providers, licensees and professional associations can be ready to appropriately support a successful transition to the new framework," Mr Drum said.

A spokesperson for FASEA told the Financial Review they do "not anticipate a drastic change in the level of new entrants" despite the deadline of January 1, 2019.

This is an invaluable share. My brother is very good at savings and also having really good investment portfolio. I think I should learn all of these things from him as want to have a profitable portfolio for an early retirement. I have some capital assets so have to learn how to calculate Cost Inflation Index on them. Can you provide a tutorial regarding it?

It does appear that you are making reference to overseas situation concerning cost inflation index and the tax implications. If this is the case you may want to contact your local CPA branch for assistance or search the internet for your relevant examples.

The latest guidance on incoming education requirements for accountants operating under an AFSL suggest about 60 hours of CPD annually will be necessary to provide basic advice services.
On Friday evening, the Financial Adviser Standards and Ethics Authority (FASEA) released two legislative instruments. The instruments provide further information about the new and ongoing requirements for those providing advice under the federal government’s new education requirements.

The new education requirements fully come into effect in 2024. To qualify for transitional concessions, advisers need to have been on ASIC’s financial adviser register between 2016 and 2018, making December this year the final deadline.

CPD requirements

Key changes include the ongoing annual CPD requirements, which have been reduced from 50 hours to 40 hours.

Ethics course requirements have also dropped from 10 hours to nine hours. However, this is still twice the number of hours that is required for most technical and regulatory subjects on an annual basis, which is “excessive,” according to Licensing for Accountants chief executive Kath Bowler.

Although the new framework is more lenient, the ongoing education requirements are still concerning for accountants.

Ms Bowler estimates that between holding a professional designation and meeting FASEA’s requirements, accountants providing advice will need to complete 60 hours of CPD annually. In some cases, this is more than what a doctor is required to complete.

“This does not recognise that accountants are not changing careers. They are adding to an existing accounting career. It’s not the 40 hours per se that is the issue, it’s the way it adds up with all the other roles,” Ms Bowler said.

Exam relaxes – slightly

By 2021, existing advisers will have to sit an exam to meet the new education requirements. The conditions of this exam have been slightly eased. It’s now 3.5 hours instead of four, and has allowances for open book for statutory materials.

The SMSF Association said the changes are an improvement, but still “arduous” for existing advisers.

“It’s as long as any university exam, and many who will be sitting it wouldn’t have sat an exam for a long time,” said head of policy at the SMSF Association, Jordan George.

Limited versus full AFSL

The latest round of guidance still does not distinguish between an accountant holding a limited versus a full AFSL. In effect, this means an accountant holding a limited AFSL will be completing training and education they won’t be using in practice.

For the SMSF Association, this is a paramount concern for members, and for the population of the SMSF adviser market. Already, about 60 per cent of Chartered Accountants have indicated they will leave the advice market if the new rules are brought into effect as they are.

“This has been a concern of the SMSF Association. Basically, the education load required under FASEA exceeds the type of advice an accountant can actually provide under a limited licence,” Mr George said.

FASEA has today released its legislative instrument for the Relevant Provider Examination for consultation.

The legislative instrument was informed from consultation received through 67 formal submissions during FASEA’s consultation process for this standard from March to June 2018.

Under the standard, Relevant Providers and Provisional Relevant Providers will undertake a 3.5 hour (including reading time) invigilated examination comprising at least 70 questions with a mix of selected response and written response question types. The examination will be open book for statutory materials.

The exam will cover Financial Advice Regulatory and Legal Obligations, Applied Ethical and Professional Reasoning and Financial Advice Construction and will be conducted in a range of capital and regional centres. It will attract a fee of $540 excluding GST per student.

FASEA has appointed The Australian Council for Educational Research Ltd, a service provider with comprehensive experience in large scale national exams, to develop and deliver the exam.

The Explanatory Statement to the Legislative Instrument contains additional guidance for stakeholders in the operation and structure of the exam.

The Legislative Instrument and Explanatory Statement can be viewed here

All feedback and submissions on the legislative instrument can be submitted through FASEA’s dedicated consultations email consultation@fasea.gov.au by 4 January 2018.

“We welcome stakeholder feedback for the final phase of development of FASEA’s Relevant Provider Examination standard and it will be reviewed prior to release of the final standard,” FASEA Chief Executive Stephen Glenfield said.

RELEASE ENDS

MEDIA RELEASE

12 December 2018

FASEA confirms accreditation process for professional designations

Following the release of its revised Education Pathways and Program and Provider Accreditation policies for consultation, the Standards Authority has invited industry associations to apply for accreditation for their respective professional designation programs.

Notices have been sent to a number of industry associations informing them of the process to have the course content of their designations approved by FASEA.

Existing advisers who have completed approved coursework in relation to approved designations will be entitled to up to two units credit into the graduate diplomas contemplated by the Standards Authority’s new education framework for advisers.

FASEA encourages all financial services industry associations with a relevant professional designation program to submit their curriculum content for approval as soon as practicable by contacting accreditations@fasea.gov.au